Investment Insights

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • Although the US stock market has experienced short-term volatility, it is expected that S&P 500 companies will report a 5% year-on-year increase in first-quarter earnings. As the earnings season begins, if the results continue to outperform expectations as seen in the fourth quarter of last year, it could provide momentum to the market.
  • The European Central Bank may cut interest rates earlier than the US this year. Coupled with recent economic data surpassing expectations, it will benefit the performance of the European stock market. However, caution should be exerted against mixed corporate earnings within the region.
  • Asian exports and overall economic outlook may benefit from the recovery in global manufacturing activities. Global capital has also been continuously flowing into Asian stock markets in recent days, which will favor the performance of Asian stock markets.
  • Although most Latin American stock markets are undervalued, and Argentina has recently implemented reform measures, the effectiveness is yet to be observed. Additionally, geopolitical issues continue to weigh on some emerging markets. The short-term volatility in emerging stock markets may persist.
  • The recent visits by political and business figures from Europe and the US to China have contributed to improving relations. Moreover, the Hong Kong stock market's earnings recovery and relatively low valuations, combined with a handful of Chinese companies increasing dividends and conducting share buybacks, are expected to help the Hang Seng Index stabilize above the 100-day moving average.
Note:

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Bond Markets View

  • Stronger-than-expected US employment data has contributed to the continued rise in US Treasury yields. However, the Fed Chair has emphasized that a rate cut later this year would be appropriate, potentially limiting the upside in US Treasury yields. Overall, the performance of sovereign bonds is poised to be stable.
  • The credit spread of highly rated US corporate bonds remains stable, and recent yield increases are attracting capital inflows into this sector, helping absorb the influx of new supply.
  • Better-than-expected economic data in mainland China has created favorable investment sentiment, reducing the impact of rising US Treasury yields on US dollar-denominated bonds in the region.
  • Overall, the US economic data has been positive, increasing the chances of a soft landing for the economy. The credit spread of US high-yield bonds remains stable.
  • With favorable economic data and continued implementation of measures to stabilize the property market, the overall relatively low valuations of high-yield bonds in Asia are likely to continue attracting capital inflows.
  • Dovish remarks from the Fed Chair have provided support for emerging market bonds. Additionally, the stable macroeconomic outlook bodes well for investment-grade Asian sovereign bonds.
Note:

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Market Drivers and Near-term Risk Sentiment

Asset Allocation Focus

  • Bonds – The latest data suggests that the timing of interest rate cuts in the Eurozone and the UK will be roughly in line with that of the US, with the earliest possible start in June. Prior to the anticipated rate cuts, global funds are expected to continue flowing into bond assets to secure higher yields.
  • Equities – Positive manufacturing data from China, Japan and the US are supporting global economic growth and investment sentiment. Asian stock markets have underperformed relative to European and the US markets in recent years, resulting in lower valuations. Adding high-dividend Asian stocks to the investment portfolio can enhance overall returns.
  • The latest non-farm payrolls report in the US reached a 10-month high, which adds variables to the pace of US inflation slowdown and timing of interest rate cuts. However, despite a strong labor market, there are no signs of wage growth, and it is believed that it will not prevent the Fed from reducing rates this year, which is set to limit the rebound of the US dollar.
  • The March ISM manufacturing index and non-farm payrolls data in the US both exceeded expectations, leading to market’s slightly pushing back on Fed rate cut expectations and a rise in US Treasury yields. However, Fed Chair Powell emphasized that the slowdown in prices remains unchanged and that a rate cut later this year would be appropriate. Such remarks may limit the rebound in US Treasury yields.
  • Increased interaction between Mainland China and the US and Europe is beneficial for improving relations. Domestically, the March Caixin services PMI continues the positive trend seen in the manufacturing sector. The People's Bank of China's Monetary Policy Committee stated in its first-quarter meeting that the economy still faces challenges. Market expectations are for increased monetary policy support.

Provided by Hang Seng Investment Services Limited

Investment Commentaries

第三季增持債券 審慎部署股市

Hong Kong Stock Market Express (Chinese Only)

Gold is expected to test US$2,300 (Chinese Only)

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